WTI holds losses near $86.50 due to tentative US-Iran ceasefire extension
- WTI declines as a tentative US-Iran ceasefire eased supply concerns and raised prospects for unrestricted Strait of Hormuz shipping.
- ING analysts noted that reopening the Strait offers immediate oil market relief, but a full recovery remains highly uncertain.
- EIA Crude Oil Stock fell by 3.3 million barrels last week, missing analysts' predicted 4.1-million-barrel drop.
West Texas Intermediate (WTI) oil price loses ground for the third successive day, trading around $86.60 per barrel during the early European hours on Friday. Crude oil prices decline on easing supply concerns following reports of a tentative 60-day ceasefire extension between the United States (US) and Iran. This potential geopolitical breakthrough significantly raised prospects for unrestricted shipping through the critical Strait of Hormuz.
According to reports, the agreement would require Iran to clear all maritime mines from the strategic waterway within 30 days. However, traders maintained a degree of caution following a CNN report indicating that US President Donald Trump has yet to officially approve the terms. This hesitation was echoed by Vice President JD Vance, who noted that while the parties are close to a deal, Washington is "not there yet," while concurrently reminding markets that the US remains positioned to substantially set back Tehran’s nuclear program if necessary.
According to ING analysts cited by Reuters, while reopening the strait would offer some immediate relief to the oil market, a full recovery remains highly uncertain. The bank noted that upstream oil production has dropped significantly since the outbreak of the war, primarily because producers were forced to shut in output to manage severe storage constraints. Because of these structural disruptions, ING expects the eventual recovery in upstream production to be a gradual process rather than an immediate bounce-back.
The latest EIA Crude Oil Stocks Change report indicated that US crude inventories fell by 3.3 million barrels last week. Although this marks the sixth consecutive week of inventory declines, the draw was notably smaller than the 4.1-million-barrel reduction that analysts polled by Reuters had anticipated. This weaker-than-expected inventory decline ultimately served to further dampen bullish sentiment across the oil sector.
WTI Oil FAQs
What is WTI Oil?
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
What factors drive the price of WTI Oil?
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
How does inventory data impact the price of WTI Oil
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
How does OPEC influence the price of WTI Oil?
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
